This invention relates to determining an intra-day net asset value proxy for actively managed exchanged traded funds or basket products structured as a regulated investment company or the like.
Exchange traded funds or basket products, such as S&P 500 Depository Receipts (SPDRs), are vehicles for holding a basket of securities that can be traded on an exchange or securities market. More specifically, these instruments usually represent an undivided ownership interest in a portfolio of stocks or other securities held by a Trust. The portfolio of stocks is often intended to track the performance of an index like the S&P 500 Index, and therefore seeks to invest substantially all of its assets in the stocks comprising the S&P 500 index, in proportion to the relative weights of stocks in that index. SPDR shares are securities issued by the SPDR Trust and may be traded on a stock exchange or in over the counter transactions.
The intra-day pricing of such securities is determined by supply and demand. Typically, these SPDR fund shares may be created or redeemed at the end of each business day at a net asset value price in so called “creation units”. In the case of the SPDRs the creation unit has 50,000 SPDR fund shares. SPDR creation units are created or redeemed at the end of day at net asset value through an in-kind transfer of securities corresponding to the S&P 500 index. While the official net asset value (NAV) of the SPDR Trust is only published at the close of every business day, the value of the underlying S&P 500 index is published continuously throughout each trading day. The per SPDR value of the index can be derived and distributed electronically to brokers, dealers, and investors throughout the world.
An intra-day value disseminated by the exchange is a real-time calculation designed to give an investor a per SPDR share price, which is very close to what the intra-day net asset value would be, were it calculated. At the end of trading, the intra-day approximate calculation and the official NAV should be very close.
Intra-day values of exchange traded trusts such as SPDRs or mutual funds such as the Select Sector SPDRs may be evaluated from the publicly available creation basket on a per share basis throughout the day as if the creation basket were the portfolio of the fund. The calculation is relatively straight forward, since the creation basket composition changes little from day to day unless the index changes. While the fund may contain proportionately a few more shares of one stock and a few less of another stock than would be arrived at by multiplying the creation basket by the number of creation baskets that constitute the fund or by using the index itself in the computation, the calculation will be very close to net asset value in either case.